Most of us think of nature as being free, or priceless. Yet, recent disasters like Superstorm Sandy show just how valuable nature is, such as for protecting coastal communities from inundation. Can we quantify nature's value in ways that help us make important decisions?

Gretchen Daily, a Stanford University biology professor and an ecologist by training, works to calculate how much each form of "natural capital" -- Earth's lands, waters, and their biodiversity -- benefits human communities. These calculations, of the value of flood protection, drinking water purification, crop pollination, and many other "services," can help influence our choices so that they take into account both human development and conservation goals. For instance, a river's clean water is certainly worth something to downstream urban residents and water bottling companies, but the farmer working the land next to the river might do better clearing the forest that cleans the water to create more farmland. Daily explores how to create systems that explicitly recognize these previously hidden values of nature, and that foster investments in conservation so as to achieve better outcomes for both people and nature.

SmartPlanet: You work on the quantifying the value of conserving nature. What exactly does that mean?

GD: We’ve come a long way in society in taking strategic decisions about how to use resources effectively, and so we’re always taking account of financial capital: how much to invest in education or health care or other priorities for human well-being. We do the same when it comes to physical and built capital, and human capital: knowledge, skills and our health.

But we almost never account for natural capital, because until now, in the big sweep of human history, natural capital has been abundant enough at a global scale. Now and then local civilizations have collapsed, but today we’re at a point where human well-being depends critically on sustaining the natural capital we have left. In the course of development, we’ve converted a lot of natural capital into other forms of capital. We’ve liquidated it in order to build up our industrial enterprise, but we’re realizing that in some cases, we’ve gone too far.

A good example is China in 1998, when it experienced one of the worst floods in human history, with over $30 billion in damages. Millions were impacted and thousands died. The Chinese government looked into the cause of the flooding, which was determined to be, in part, deforestation. That region will always be vulnerable to flooding due to a monsoonal rainy season, but deforestation has greatly exacerbated the flood risk. Overnight, the government declared a ban on logging in Yunnan province and launched the world’s most ambitious project to invest in natural capital.

Let’s define natural capital: Natural capital is embodied in Earth’s lands and waters and in the biodiversity in them. It’s living systems that supply benefits to people -- a capital stock that, depending on how it’s managed, will yield benefits to people, like flood control, climate stabilization, sand and dust storm control, water purification for drinking and irrigation, hydropower production. Putting in more forest in China was going to be better for those things, and for securing our genetic library. A huge fraction of the world’s biodiversity is concentrated in China’s diverse ecosystems.

So in China, investing in natural capital has become a matter of national security. First they banned logging in Yunnan province, which held the headwaters of some of the river systems that flooded. Then they did a careful analysis asking, “Which areas, if reforested, would yield the highest return on investment to society in reducing flood risk?” They determined it was these steep slopes in certain provinces in the headwaters of their river systems. By investing in reforestation, they would achieve the greatest protection at the lowest cost to society, so they invested $100 billion over the last decade. China’s now had the greatest increase in forest cover over that decade of any country. Most countries are still losing forest, but China has just restored this massive amount, and it’s all in the name of securing vital benefits for society.

So the big idea that’s taking off everywhere is to identify the natural capital that is most vital to human well-being into the future, as countries visualize their development, and to secure that while at the same time promoting development. It’s really changed conservation in that it’s oriented around achieving human well-being and a return on investment for society.

In the past, the conservation movement has made some important achievements, but the amount of Earth’s lands and waters now protected is a far cry from what’s needed to sustain human well-being. On land, we protect about 12 percent on paper, but the land that’s protected is the least contested politically and the least inhabited by Earth’s machinery of nature -- it’s rocks and ice in conservation terms, so from a life-support point of view, it’s not nearly enough to give us flood control, sand and dust storm protection, water purification for drinking and irrigation, hydropower or climate security. Or enough to give us agricultural services like pollination and pest control. And this reserve network is not remotely robust enough to supply services on the level demanded and on the places in which people need them.

Can you list the services?

Imagine going to the moon and asking, “What would we need to set up there to make life physically possible and also ideally, fulfilling?” If you pose the problem that way, you can categorize the services into four groups.

There’s “stuff we consume directly,” ecosystem goods, which include food and pharmaceutical products. Of the top 150 pharmaceuticals on Western markets, 120 trace their origin directly to natural products — plants, timber and timber-related products.

But then, you think -- and this is the second category -- “What species and ecosystem plants and animals are needed to sustain all those species that we depend on directly?” These "life-support services would include things like climate stabilization, flood control, water purification, landscape stabilization so you don’t have a lot of landslides or sedimentation in water that fills up reservoirs and reduces the lifetime of hydropower facilities, fire suppression, pollination –- of our crops, over 70 percent of our crop strains require a bee or some other animal to transfer pollen to get any harvest. Or they give a yield boost. Another is pest control: The vast majority of agricultural pests are controlled naturally by wasps and pests, not by applying dangerous chemicals. So, that’s a list of life-support services.

The third category is sometimes called cultural services, or life-fulfilling benefits. So if you were headed to the moon, what would make life fulfilling –- not like the life of a factory-farmed chicken? So you think of inspiration, whether spiritual or knowledge-based, that we get from nature. There’s real improvement in cognitive function and also in emotional well-being directly tied to nature, plus the scenic beauty, recreational benefits and many cultural practices connected to nature.

The final category is option value, and that’s recognizing that we don’t know which species or ecosystems we need to take to “the moon” -- or into the future with us. As our societies change, some species might have a value we don’t recognize now. They might be useful in protecting future crops from land degradation as soils are used more intensively and as climate changes and new diseases or pests emerge, or they might be good for pharmaceuticals in ways we haven’t discovered yet.

How do you figure this out?

We’ve developed a software system called InVEST that is download-able and accessible by anyone, open-source. It lets users visualize maps of a landscape or a seascape and ask, “If I were to invest in nature, where would I make that investment to achieve the greatest return for society?”

Like Google Earth, you can zoom in on your favorite country, region or local town, and say, “We really need to increase food production. What if wipe out this forest and these wetlands and we grow more food?” The software will show you an increase in food production, but then it will show a decrease in the benefits that come from forest and wetlands, like carbon sequestration, climate stability or provision of pollinators to the agricultural plots. So it lets you look at the suite of benefits and evaluate the tradeoffs in a neutral way, without a particular outcome pre-thought out.

We worked with Kamehameha schools, the biggest landowner in Hawaii and the largest private trust in the U.S., which recently changed their mission. Previously, they tried to get the highest economic return from the land, but ten years ago, they began trying to balance economic values with environmental, cultural, educational and community values. In a two-year planning process for 20,000 acres on Oahu, we asked, “Given the current landscape, what future makes sense?” We came up with three priorities -- first, to address energy security because the state imports over 90 percent of its energy. So we mapped out using sugar cane as a biofuel feedstock: What about converting this land parcel into sugar cane production?

The second was residential development, especially for the native Hawaiian community, so instead of a big Waikiki, what would low-density housing look like? And the third was to improve crops for local markets for diversified agriculture and forestry. Hawaii has a massive food problem. They import in 90 percent of their food, and at any moment, they have maybe a few days’ food supply. They also have what often is the world’s most highly valued wood species, Koa, an amazingly beautiful hardwood, but they haven’t developed a sustainable industry around that. They’ve just been mining old-growth forests.

So, we put all the variables into the software and found the projected income stream would be lowest for turning that land into agriculture and forestry, but you’d get a better balance of the benefits that they’re focused on now.

So they actually chose this strategy even though it had a lower projected income stream -- and they’re implementing that plan now and have won the biggest award from the American Planning Association just last year for a really visionary and innovative plan to achieve both human development and economic objectives while also securing natural capital.

How do you put the economic piece in?

You can attach dollar values to the products. For instance, how much income would come from that subdivision, and who would receive it? And the same with agriculture and forestry. Some of them are a bit harder to value. With carbon storage, we’re using the price of carbon on the international market, but it’s been going down because we’re failing to reach an international agreement on climate. With water quality, you can ask, what would it cost to purify the water with a filtration plant as opposed to doing it naturally? With flood risk, you have to look at avoided damages, and say, how many lives would be saved? It gets a little tricky: How do you value a life? How much property would be protected, and what’s the value of that property?

When you’re in the field, what are you doing?

The foundation of the software is all this science, some of which is really well-developed, like hydrology. In other areas, there’s very little knowledge, like in pollination services and pest control services. So we generate new knowledge, which is “taking roll call,” where we go out into nature and ask, “Which of the organisms out here are controlling pests? Which bees are pollinating the coffee and other crops?”

We get teams of students and do the basic ecology. In one project, we knew that all these different fruit, vegetable and nut crops require pollination, so we decided to focus on coffee, the most highly valued commodity exported from the developing world most years.

Coffee is bee-pollinated. Honeybees are in decline worldwide, so we set up this experiment on this huge farm in Costa Rica with little bits of forest. We wanted to know, do these bees live in the forest? After months of catching bees in different places, we found out they stay in the forest most of the year and come out to the coffee only when it blooms, which happens for just one week. So coffee farms cannot support bees throughout the year — forest is needed to keep those worker bees going.

Then we measured how much pollination is going on at different distances from forest. Bees don’t fly infinite distances from forest. They fly like a halo some distance from forest. So we quantified the yield on coffee plants at different distances from forest, and we found that we had more bees, more pollination and a yield boost of 20 percent if we were near forest than if we were far from forest. We asked one farmer how much more that extra 20 percent was worth, and it was worth $60,000 in that one year, which was a year of low coffee prices.

Then we counted how many types of bees were living near this forest. We thought maybe 100 at most, but it was 600 -- 700. You catch them all and sit in the lab with the bees -- you can tell them apart by details you can only see with a microscope, like with hairs coming off the forehead: Do they split at the end or not? How many hairs do they have? Little tiny details. We nearly went blind sorting all these different bees.

We’re also doing it for pest control on coffee. Here’s the biggest pest worldwide. It’s this tiny beetle, and no pesticide can get it because it lives inside the bean. But 170 bird species and bat species live near coffee if there’s a forest nearby, and we’ve found that they reduce the pests by 50 percent -- which reduces pest damage by 50 percent.

Left, the green coffee berry to the left of the red berry has a small hole bored in it by the coffee berry borer beetle, pictured right. (Daniel Karp)

So we spent years seeing what birds and bats are out in the field. We would net bats at night. Then they poop in these little bags because they get kind of scared, and we bring the poop back to a lab that extracts the DNA from it and can tell us whether they were eating that little pest or not. It’s spectacular and amazing how connected we are to bats. Our morning coffee depends on bats.

We’re finding so far that some key bat species just gobble up that pest, and they all need forest. So farmers could increase the amount of forest on their land in a profitable way.

What kind of societal change can you see happening if your work becomes more widespread?
People will automatically and instinctively account for the values of nature in planning and decision-making. And we’ll understand that our wellbeing and posterity is derived from natural assets. That would be the ultimate outcome –- that individuals, communities, corporations or the government will, as a routine matter, mainstream the values of nature into the way we think and what we decide to pursue.